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Debt Consolidation Loans

People in the UK have access to different types of loans, and there may come a time when monthly installments and interest payables become unmanageable for the borrower. When the situation becomes too taxing, debt consolidation is the best available option.

Debt consolidation loans allow you to close your existing debts with one loan and one reasonable and manageable monthly repayment. You may be able to reduce your monthly repayment, secure a lower interest rate, or increase the time period of the loan closure.

This method normally combines all other debts including credit cards and unsecured debts, leaving you with a trouble-free overall budget that will enable you to comfortably repay the loan. You can combine all these debts and make arrangements for one affordable payment with an unsecured debt consolidation loan.

Debt consolidation loans can come under both secured and unsecured loans. Secured loans carry a lower rate of interest and a higher loan amount. This is due to the fact that secured loans are disbursed against your home or any items of major value. This reassures lenders that they will have something to fall back on if you fail to make regular repayments.

Unsecured loans don’t have any security attached to them, so lenders are more careful when disbursing them. This type of loan poses a very high risk for them. Higher rates of interest, lower loan amounts and constraints on how the money is spent form part of the criteria of obtaining unsecured debt consolidation loans.

In both cases, the main criteria involve your credit rating. However, even borrowers with bad credit rating can avail these loans. Over a relatively short period of time, they can often significantly improve their current credit rating by making regular repayments. The repayment period usually ranges from one to ten years. The interest rate is also fixed and loan protection insurance helps to reduce financial tension.

You should seek a debt consolidation loan in any of the following situations:

  • You’re unable to make a number of monthly debt payments and want to combine them into a one-time monthly payment
  • Interest rates vary and you would like to round it off to one rate
  • You’re unable to manage your budget with all your debt payments

When you seek this type of loan, lenders will scrutinise any outstanding debt. They will also determine your credit risk to verify if you’re eligible for the loan. If you have a poor credit history or your debts are too high, the lender may not offer you an unsecured loan. They may consider you for a secured loan instead. However, some specialised lenders may charge you a higher rate of interest and place more restrictions on the loan.

Nowadays, debt consolidation has become a common alternative for people who find themselves in a dire financial state. Many lenders and numerous websites offer debt consolidation loans, and most of the lenders are involved in e-commerce. Just make sure you carefully read and understand the lender’s offer. You should also carefully appraise the advantages and disadvantages and try to determine if there are any hidden catches involved. Debt consolidation experts can help you find the most suitable debt consolidation loan so you can finally free yourself from debt.

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